Institutional theory, business systems and employment relations

The business systems approach seeks to explain why and how economic activities are carried out in different ways in different economies. It seeks to explain, in short, patterns of economic coordination and firms’ attendant capabilities. In order to explain this outcome, the business systems framework focuses not only on external and governance dimensions, but also practices within two broad categories: delegation (employee involvement and participation) and interdependence between employers and employees (employees’ security of tenure and firms’ investment in people). The approach establishes a useful analytical template for applied comparative analysis to identify the institutional causes of variation in intra-organizational practices. The business approach, therefore, draws attention to fundamental firm variation, unlike many perspectives in business and management that tend to emphasize firm homogeneity, and the impact of that variation on important outcomes for firms, employees and societies.